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Kai Ryssdal: The White House wants the federal government to be done with the business of mortgages. That’s a little tricky, though, when Uncle Sam owns the two companies that guarantee 85 percent of the home loans issued in this country.
Today the Obama administration released its plan to fix Fannie Mae and Freddie Mac. They are — as you might recall from the early, early days of the financial crisis — functionally bankrupt, propped up by hundreds of billions of dollars in taxpayer money. The administration says it’s time to shut them down, and pick from one of three visions of how to replace a huge government backstop to mortgage lending.
Our Washington bureau chief John Dimsdale explains no matter which one you choose, mortgages are going to be more expensive.
John Dimsdale: One option would get Uncle Sam out of the mortgage business altogether, except for limited help for moderate-income homebuyers. Another would have the government rescue private markets only during a crisis, like the one we just went through. Lastly, the government would sell mortgage insurance to private lenders.
Treasury Secretary Timothy Geithner says that would protect taxpayers.
Timothy Geithner: The markets would be charged a fee for that guarantee. And if the government mispriced the guarantee and was exposed to loss, that would be recouped in the form of a fee on the broader market over time.
Government insurance, paid for by private lenders, is an idea already endorsed by the Mortgage Bankers Association. But President John Courson warns that cost will be passed on to home buyers.
John Courson: Anything that you look at in this proposal, even in our proposal, is clearly going to create a higher cost for consumers.
Courson says the government insurance option would be the cheapest for consumers. That’s because withdrawing government support puts all the risk that loans won’t be repaid on the lenders.
John Taylor heads the National Community Reinvestment Coalition. He says buyers of mortgage-backed securities would balk.
John Taylor: Because investors want to invest in something where they can’t lose their money, namely a government-guaranteed program. There’d be less money available and the result would be higher costs for those funds.
Putting home ownership and a ticket to a middle-class life out of reach for too many workers, he says.
In Washington, I’m John Dimsdale for Marketplace.